Egypt Receives $1bn Energy and Food Loan
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Cash-strapped Egypt has signed a $1 billion deal with the Saudi-based Islamic Development Bank to finance its energy and food imports. Egypt’s economy has been hit by last year’s uprising that ousted Hosni Mubarak, with deep cuts to its tourism and investment revenues.
The agreement between the Egyptian government and IDB was signed on Sunday in Cairo by Waleed Abdul Mohsen al-Wohaib, chief executive of the institution and Egypt’s international cooperation minister, Fiza Abu el-Naga.
Cash-strapped Egypt has signed a $1 billion deal with the Saudi-based Islamic Development Bank to finance its energy and food imports. Egypt’s economy has been hit by last year’s uprising that ousted Hosni Mubarak, with deep cuts to its tourism and investment revenues.
The agreement between the Egyptian government and IDB was signed on Sunday in Cairo by Waleed Abdul Mohsen al-Wohaib, chief executive of the institution and Egypt’s international cooperation minister, Fiza Abu el-Naga.
According to a government statement, the finance is part of a previous agreement that would provide Egypt with $2.5 billion in loans.
While the financing mechanism is not clearly stated, almost two-thirds of the funds will be used for fuel and energy subsidies, while the rest will be used to ease food prices – especially wheat of which Egypt is the world’s top importer.
Related: Egypt Economic Statistics and Indicators
Food and fuel imports are the two single largest strains on Egypt’s budget with subsidies taking up as much as 28 percent of its $745 billion budget.
Egypt’s economy has been hit hard by last year’s uprising that toppled Hosni Mubarak and the subsequent fall in tourism revenues, as well as a slump in foreign direct investments and a decline in foreign currency reserves, with interest rates having risen to historic highs as funds grow tighter.
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The newly inked deal will draw attention on how the new government formed by President Mohamed Morsi, who took office on Saturday after winning Egypt’s first credible leadership election, gets to grips with arresting Egypt’s economic decline.
Egypt has also been negotiating for months a $3.2 billion loan from the International Monetary Fund.
The IMF has said there is no timeline for concluding its loan negotiations with Egypt, but insisted that any IMF financing package will require the broad support of all political parties in the country, and remains conditional on Egypt’s implementation of an economic reform programme.
The Financial Times reported yesterday that Morsi has expressed confidence that the IMF deal can be reached.
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